Tenneco Reports Firm Quarter; Aftermarket Changes Showing Results

Tenneco Automotive has announced that its fourth quarter 2001 performance improved versus the same period one year earlier.
Before restructuring charges and other items, the company’s EBIT and EBITDA performance grew 42% and 20%, respectively, on 10% lower revenues, resulting in a 66% improvement in earnings per share compared with fourth quarter 2000. The company reduced its SGA&E costs in the quarter by $25 million U.S. or 21%, and improved gross margins by .7% to 20.6% compared to fourth quarter 2000.
“Our strengthening aftermarket operations in both North America and Europe helped improve our operating performance and narrow the profitability gap in the fourth quarter,” said Mark P. Frissora, chairman and CEO of Tenneco Automotive. “This is particularly significant given the year-over-year volume declines seen across the industry.”
For the full year, the company improved its cash position by reducing its working capital by $162 million or, as a percentage of sales, from 13.3% to 9.2%. It trimmed its capital expenditures by $19 million to $127 million. These and other cash management improvements helped the company reduce its year-end 2001 net indebtedness by $30 million, as compared to the prior year-end. All figures in U.S. dollars.
“Our progress in reducing our investment in working capital and fixed assets was very encouraging,” Frissora said. “The team’s over-performance on cash made a tremendous difference in this tough market.”
Tenneco Automotive recorded charges totaling $32 million in the fourth quarter, primarily related to new restructuring activities it is initiating in North America and Europe. The company intends to close eight facilities, consolidate or rearrange and improve the workflow in 20 others, and move production assets among some of its plants. These activities are designed to reduce existing over capacity, as well as improve standardization and efficiency in its global manufacturing, distribution and logistics operations.
The company expects to substantially complete these actions by the end of the first quarter of 2003, and anticipates they will generate $11 million in savings during 2002, and $30 million in annualized savings beginning in 2004. Up to 900 employees could be affected by these combined actions in North America and Europe.
Reporting on regional results, the company said its North American original equipment revenue decreased 5% during the quarter to $306 million versus $322 million in the fourth quarter of 2000. Excluding pass-through sales, revenue decreased 11%.
North American aftermarket revenue was relatively unchanged versus the previous year at $116 million. North American EBIT increased to $20 million from $9 million in the fourth quarter of 2000. Significantly lower SGA&E expenses and improved aftermarket pricing offset the impact of lower OE revenues. The North American aftermarket improved its profitability and margins for the third straight quarter in 2001, posting a 20% operating margin improvement versus the fourth quarter 2000.
For the full year 2001, Tenneco Automotive reported a net loss of $130 million, or $3.43 per share, compared with a net loss of $41 million, or $1.18 per share in 2000. Excluding charges and other items, the company posted a net loss of $18 million or 48-cents per share in 2001, versus income of $4 million or 10-cents per share in 2000. Revenues for 2001 were off five% to $3.36 billion. On an adjusted basis, 2001 revenues were off 10%. Before charges and other items, 2001 EBITDA was $300 million, down 11% from $336 million in 2000, and 2001 EBIT decreased 21% to $147 million versus $185 million the previous year. However, EVA improved $7 million year-over-year driven primarily by significant working capital improvements.
“Current industry and global economic trends point to yet another challenging year ahead,” Frissora said. “However, we intend to counter these conditions by remaining aggressively vigilant on the cost side of the business and continuing to focus on cash flow. We will also look to offset anticipated volume declines by pursuing new business in our aftermarket business, as well as by continuing to introduce advanced technology solutions for our OE customers worldwide.”